Which type of forex broker is best for beginners?

For a beginner, the regulator matters more than the model. A strictly regulated broker with a standard, commission-free account and micro lots is a sensible start, even if it is a market maker. Small trade sizes and low deposits help you learn cheaply. Raw-spread accounts start to matter once you trade often or in larger sizes.

Are STP and ECN brokers the same thing?

No, though the terms are often mixed up. Both pass orders on without a dealing desk. An STP broker routes your order to its chosen liquidity providers and usually earns from a spread markup. An ECN places your order in a network where many participants compete, shows raw spreads and charges a commission instead.

How can I tell if my broker is A-book or B-book?

You usually cannot tell for a single trade, and most brokers use both. The order execution policy will say whether the firm deals as principal and may describe how it hedges. What you can measure is the result: fair spreads, balanced slippage, few requotes and fast withdrawals matter more than which book your trade sat on.

Is a raw-spread account worth it for a small account?

Often not. The saving is a fraction of a pip per trade, which comes to cents when you trade micro lots a few times a week. Raw accounts may also need a larger deposit. They start to pay off when you trade frequently or in bigger sizes, where a saving of 0.3 pips per trade adds up.

Types of Forex Brokers: ECN vs STP vs Market Maker Explained

Intermediate8 min read

What are the types of forex brokers?

There are two main types of forex brokers. Dealing desk brokers, also called market makers, take the other side of your trade themselves. No dealing desk brokers pass your order to outside liquidity providers, using either the STP or the ECN model. Many brokers are hybrids that do both, depending on the client and the trade.

A liquidity provider is a bank or large trading firm that quotes prices at which it will buy and sell. The labels matter because they shape your costs, how your orders are filled and whether the broker gains when you lose.

How do forex brokers make money?

Spread. The spread is the gap between the buy (ask) price and the sell (bid) price. Most brokers widen the raw market spread a little and keep the difference. See spreads and pips for how it is measured.
Commission. A fixed charge per lot traded, where a standard lot is 100,000 units of currency. It is common on raw-spread accounts, which pass on the market spread with little or no markup.
Swap markup. Swap is the daily financing charge or credit for holding a trade overnight. Brokers add their own margin to it, as explained in forex swap fees.
Client losses. When a broker keeps your trade in-house instead of passing it on, it is the other side of the bet. Your loss is its gain, and your gain is its loss.

What is a market maker or dealing desk broker?

A market maker sets its own buy and sell prices, based on the wider market, and fills your order from its own book. When you buy, it sells to you. It may match your trade against another client who is selling, hedge (offset) part of its total exposure with a bank, or simply hold the risk.

Market making is legal and normal. The question is whether the firm does it fairly.

What are STP and ECN brokers?

Both are no dealing desk (NDD) models: no dealer or in-house book stands between your order and the outside price.

STP (straight-through processing). Your order is passed automatically to one or more liquidity providers. The broker usually earns by adding a small markup to the spread it receives. Spreads are variable and there is often no separate commission.
ECN (electronic communication network). Your order enters a network where banks, funds and other traders post prices, and it is matched with the best one available. You see the raw spread, which can be close to zero on major pairs at busy times, and you pay a commission per lot.

Two caveats. First, a true ECN is rare in retail forex. Many “ECN accounts” are really STP accounts with raw pricing and a commission. The label is marketing. Second, even with an NDD broker your legal contract is with the broker, not with a bank. In most cases the broker takes your trade and covers it with an identical trade of its own.

A-book vs B-book: what is the difference?

The industry’s own words for this are simpler.

A-book. The broker passes your trade to the outside market. It earns the markup or commission whether you win or lose, so it wants you to keep trading for years.
B-book. The broker keeps your trade in-house and acts as your counterparty, the other side of the deal. It profits when you lose.
Hybrid. The broker sorts its clients’ trades. Small accounts and trading styles that tend to lose are often kept on the B-book. Large trades and clients who win steadily are passed to the A-book, where they become someone else’s risk.

Most large retail brokers are widely understood to run a hybrid model.

Do brokers trade against you? The real conflict of interest

With a B-book broker the conflict is real: every dollar you lose is a dollar of revenue. But regulator-required risk warnings show that most retail accounts lose money on their own, through over-sized trades and poor risk control. An honest B-book broker does not need to cheat. It only needs to quote fair prices and wait.

The danger comes from dishonest firms that abuse the position: prices that spike to hit stop-losses (orders that close a trade at a set loss) when the wider market did not move, slow fills on winning trades, slippage (a fill at a different price from the one you clicked) passed on only when it hurts you, and blocked withdrawals. Our forex scams guide lists the warning signs.

Regulation limits this. Strict regulators require best execution, which means taking all reasonable steps to get the best result for the client. They also require a written conflicts-of-interest policy and prices that follow the underlying market. Regulators have fined firms for asymmetric slippage, where price improvements are kept and only worse prices are passed on. An unregulated market maker faces none of these checks, which is why how forex regulation works matters more than the broker’s label.

What each broker model means for you

Spreads and commission. Market makers often quote fixed spreads with no commission. These are easy to plan around but usually wider, and may still be widened or suspended during major news. NDD spreads are variable: tight in busy hours, much wider late in the New York day and around data releases, with a commission per lot on raw accounts.
Requotes vs slippage. A dealing desk using instant execution may reject your price and offer a new one, called a requote. An NDD broker using market execution fills you at the next available price, so you get slippage instead, in your favour or against you. Both are most common when trading the news.
Minimum deposit. Market maker and standard accounts often start from a very small sum. Raw-spread accounts usually ask for more.
Scalping rules. Scalping means taking many trades that last seconds or minutes. Some dealing desk brokers restrict it, for example with a minimum holding time. NDD brokers normally welcome it, since they earn per trade. Read the terms before you start forex scalping.

ECN vs standard account: which costs less?

Here is a worked example with hypothetical numbers for EUR/USD, where one pip, the smallest standard price step, is worth $10 on a standard lot.

Standard account: spread 1.2 pips, no commission. Cost per lot = 1.2 × $10 = $12.
Raw-spread account: spread 0.2 pips plus $7 commission per lot, covering both the open and the close. Cost per lot = 0.2 × $10 + $7 = $9.

The $7 commission equals 0.7 pips, so the raw account costs 0.9 pips all-in against 1.2, a saving of $3 per lot. An active trader placing 100 trades a month at 0.10 lots pays $120 on the standard account and $90 on the raw one. Someone placing five trades a month at 0.01 lots saves 15 cents in total, which does not justify a higher minimum deposit.

Always compare the all-in cost: spread plus commission, converted into pips or dollars. Enter both accounts into the spread cost calculator using the average spread, not the “from 0.0” figure in the advert.

How to check how your broker executes orders

The homepage label tells you little. These checks tell you more:

Order execution policy. Regulated brokers publish this in their legal documents. It states whether the firm acts as principal, meaning it is your counterparty, names the sources of its prices and explains how slippage and requotes are handled.
Execution statistics. Some regulators have required brokers to publish execution-quality data, and many firms publish it by choice: average fill speed, the share of orders filled at the requested price, and how often slippage was positive or negative. Balanced positive and negative slippage is a good sign.
The regulator and the company. Check which company holds your account and who supervises it, using the steps in how to choose a forex broker.
Your own test. Trade the smallest size on a live account for a few weeks. Note spreads at different hours, fills around news and how long a withdrawal takes.

A well-regulated market maker with fair fills is a safer choice than an unregulated firm that calls itself ECN. Put regulation first, execution quality second, all-in cost third and the label last. You can compare regulated brokers side by side before you decide.

Choosing the right broker model lowers your costs and removes some unfair risks, but it cannot turn a losing strategy into a winning one. Forex and CFDs are leveraged products with a high risk of losing money quickly. Only trade with money you can afford to lose.